ARKR Stock Up Despite Q2 Earnings Decline, Legal Costs Dampen Results

Shares of Ark Restaurants Corp. ARKR have gained 1.3% since the company reported its earnings for the quarter ended March 29, 2025. This underperformed the broader S&P 500 Index, which advanced 4.6% over the same period. However, the stock’s performance over the past month has been notably strong, surging 34.1%, handily outpacing the S&P 500’s 11.8% increase.Quarterly Financial OverviewFor the second quarter of fiscal 2025, Ark Restaurants posted total revenues of $39.7 million, down 5.9% from $42.3 million in the year-ago period. When excluding revenues from the now-closed El Rio Grande and the Tampa Food Court, the decline narrows significantly, with revenues down 1.1% to $39.7 million from $40.1 million last year.Despite a modest improvement in same-store sales — up 0.4% year over year, excluding revenues from El Rio Grande and the Tampa Food Court — profitability deteriorated sharply. The company reported a net loss attributable to Ark Restaurants of $9.3 million, or $(2.57) per share compared with a net loss of $1.4 million, or $(0.40) per share, in the same quarter last year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)The loss was primarily driven by a $3.4 million goodwill impairment and a full valuation allowance of $4.8 million against deferred tax assets, both of which are non-cash items. Adjusted EBITDA, which excludes these charges, was a loss of $0.7 million compared with a loss of $0.3 million in the prior-year period.Other Key Business MetricsCost efficiencies were mixed across categories. Food and beverage costs declined 5.4% to $11.5 million from $12.1 million, and payroll expenses also dropped 7.1% to $14.4 million from $15.5 million. However, general and administrative expenses rose 5.8% to $3.3 million from $3.1 million, and depreciation and amortization fell 33.7% to $5.6 million from $5.8 million. Occupancy costs and other operating expenses also declined 4.3% to $0.7 million from $1.1 million. Operating loss was $4.6 million compared with a $1.2 million loss in the prior-year quarter, primarily due to impairments and legal costs associated with a lease dispute.On the balance sheet, Ark Restaurants reported $11.1 million in cash and $4.3 million in total debt as of March 29, 2025. Management noted this debt will be refinanced under a new facility with increased capacity of $15–$20 million.On a segmental basis, CEO Michael Weinstein noted on the earnings call that Las Vegas operations showed marked improvement, with greater efficiency driving significantly better weekly cash flows. Florida restaurants reported revenue gains compared to the prior year, while operations in Alabama remained stable. The company also highlighted signs of improvement at its Washington, D.C., location following management changes.Ark Restaurants Corp. Price, Consensus and EPS Surprise Ark Restaurants Corp. price-consensus-eps-surprise-chart | Ark Restaurants Corp. QuoteManagement CommentaryManagement attributed the steep losses to several non-operational headwinds. CFO Anthony Sirica explained that the goodwill impairment resulted from a mandatory revaluation triggered by a decline in ARKR’s stock price. This write-off also necessitated a $4.8 million valuation allowance on deferred tax assets, pushing the company into a cumulative loss position. These accounting treatments, while non-cash, severely impacted bottom-line results.CEO Weinstein also pointed to approximately $650,000 in legal and consultancy fees tied to the company’s ongoing dispute over its Bryant Park leases as another drag on EBITDA. Without this expense, he noted, EBITDA for the quarter would have shown year-over-year improvement.Factors Influencing ResultsA key challenge for the quarter was the absence of revenues from two previously operating units — El Rio Grande and the Tampa Food Court. Ark Restaurants recognized a $140,000 gain related to final settlement negotiations following the January 2025 closure of El Rio Grande, and a $5.2 million gain in the prior quarter from the termination of the Tampa lease. While these gains were financially beneficial, the elimination of their operating income contributed to the decline in revenues.The uncertainty surrounding Ark Restaurants’ Bryant Park properties in New York also weighed heavily on the company. The leases expired on April 30, 2025, and while the company continues to operate as a holdover tenant, it has filed legal action challenging the lease award process. The company alleges the selection of a lower-bidding competitor was improper and continues to pursue legal remedies to retain these high-revenue properties, which accounted for approximately 15% of total revenues for the six-month period.Other DevelopmentsThere were no new acquisitions or divestitures announced during the quarter; however, management indicated that they are actively evaluating new opportunities. CEO Weinstein expressed optimism that Ark Restaurants could close on one or more deals in the coming months, though no definitive plans were disclosed. Meanwhile, ARKR is finalizing a new credit facility with its current lender, which is expected to provide a total capacity of $15 million to $20 million and term out the existing $4.3 million debt over three years.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ark Restaurants Corp. (ARKR): Get Free ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks